Changes to International Trade in Services Statistics, August 2006 (Feature Article)

Changes to International Trade in Services Statistics, August 2006

INTRODUCTION

This article describes revisions to the international trade in services series which have been implemented with the August 2006 issue of International Trade in Goods and Services, Australia (cat. no. 5368.0). The new data incorporate improvements to the travel and other business services components of the international trade in services statistics. The changes have resulted in revisions to both the credit and debit series. Estimates for earlier periods have also been revised maintaining consistency across the time series.

Introducing these changes is consistent with the ABS' aim of improving the accuracy of estimates, by making use of new data sources as they become available.

The major changes have been applied to:

education related travel credits - updated benchmark data has been introduced for international student expenditure; and

other business services credits and debits - incorporating improvements to the coverage of the Survey of International Trade in Services (SITS).

Other changes introduced include:

travel credits and debits - a reclassification of travellers whose purpose of journey is employment from 'other personal' to 'business' travel; and

travel credits - alignment of the use of the International Visitors Survey (IVS) with the use of the National Visitors Survey (NVS).

This article outlines the changes and summarises the impact on the ABS statistics on international trade in services.

STATISTICAL IMPACTS

The largest impact of the updated benchmarks for travel credits and improvements to coverage for other business services credits and debits has been in the last five years. Graphs 1 to 3 below illustrate the overall effect on international trade in services estimates on an annual basis, including the balance on international trade in services.

Total services credits has increased mainly due to the revised estimates for education related travel, and to a lesser extent improvement to the coverage of SITS. In 2005-06, travel credits were estimated to be $22.7b, revised up $2.6b from the previous estimate of $20.1b. Other business services have contributed $1.1b to the upward revision, with 2005-06 now estimated as $10.0b, compared with the previous estimate of $8.9b.

GRAPH 1: Total services credits

The improvement in the coverage of SITS has led to the increase in total services debits, in particular this has affected estimates in the last five years. In 2005-06, other business services debits were estimated to be $10.7b, revised up $1.0b from the previous estimate of $9.7b.

GRAPH 2: Total services debits

The revisions to the balance on services is being driven by the changes to travel services, with the surplus in the balance on travel services increasing substantially due to the much larger revision to travel credits compared to the relatively small revision to travel debits. The balance for 2005-06 has been revised from a deficit of $0.7b to a surplus of $1.2b. This is driven almost entirely by the revisions to travel services credits, as the revisions to other business services credits and debits were of a similar magnitude. The surplus on travel services peaked in 2005-06 at $7.9b (revised up by $2.5b from the previous estimate of $5.4b).

GRAPH 3: Balance on services

EDUCATION RELATED TRAVEL CREDITS

The Survey of International Student Spending (SISS), last conducted in 1997, was commissioned by the Department of Education, Science and Training (DEST), and conducted again in 2004, with a supplementary component for English Language Intensive Courses for Overseas Students (ELICOS) run in 2005.

The results from the SISS are used by the ABS to produce estimates of expenditure on goods and services by international students in Australia. These estimates are compiled by education category, with the SISS results increased on a quarterly basis using the general increase in the Consumer Price Index (CPI).

Information collected in the SISS does not completely align with the scope of travel services in the Balance of Payments. As a result a number of adjustments have been made to account for the classification and conceptual differences:

the SISS collects data on 'family' expenditure, as such those who report expenditure for family members as well as themselves have higher average weekly expenditure than those reporting expenditure just for themselves. To account for this scope difference, the ABS has derived the expenditure estimates by using a 'trimmed mean' removing the top 1% of records for each category to compensate for the possible survey bias in students with dependents. Expenditure on non-student family members is captured in other components of travel services.

the SISS includes estimates of expenditure on international airfares purchased in Australia. These are removed from the travel estimates as they form part of transportation services.

the SISS has been adjusted to account for expenditure on mortgage payments, rates and household insurance. The purchase of property indicates a change of residency and therefore this expenditure is out of scope of the Balance of Payments.

The 2004 SISS indicates that expenditure by international students in Australia is significantly higher than previously estimated, particularly for the higher education sector, see table F1. The incorporation of these expenditure estimates into the education related travel credits series has resulted in revisions to this series of $2.0b for 2005-06.

Table F1: Average weekly expenditure on goods and services by international students in Australia - December quarter 2004

Estimate based on 1997 SISS, increased by CPI

Estimate based on 2004 SISS

Difference

Sector

$

$

$

Higher education

348

562

214

Vocational education

336

488

152

Schools

267

392

125

ELICOS

301

467

166

Non-award

348

514

166

Average

334

517

173

The level of the education related travel credits series has been revised back to January 1997 when the last SISS was conducted. To ensure consistency across the time series the revisions have been applied proportionately.

OTHER BUSINESS SERVICES CREDITS AND DEBITS

Two projects related to the coverage of the Survey of International Trade in Services (SITS) were undertaken in 2005. First, a coverage survey was dispatched to approximately 5,000 businesses who were not identified in the population of businesses undertaking trade in services activity. Second, approximately 2,000 businesses identified as having trade in services activity but not currently providing information in the sample survey were sent a coverage form to update their characteristics. These coverage exercises resulted in an increase of businesses in the population for SITS from 3,299 to 4,615 businesses.

As a result of the changes to the population for SITS the level of the estimates for other business services for both credits and debits increased significantly. In 2005-06 credits increased 13.2% while debits were up 9.9% on the previous estimates for this period.

In 2005-06 the most significant increases in other business services credits were in the engineering services, up $0.4b, computer and information services, up $0.1b and personal, cultural and recreational services, up $0.1b.

GRAPH 4: Other business services credits

The magnitude of the increases in other business services debits have been similar to the increases seen in the credits series but in different service categories. During 2005-06 the largest increases have been recorded in royalties and licence fees, up $0.5b and communication services, up $0.2b.

GRAPH 5: Other business services debits

Revisions have been applied proportionately to these series back to July 1991 to maintain consistency across the time series.

OTHER CHANGES

Business and other personal travel services

Previously, travel for the purpose of employment was included by the ABS in 'other personal' travel. However, according to international Balance of Payments standards, personal expenditure on goods and services by seasonal, border and other non-resident workers in the economies in which they are employed should be recorded under 'business' travel.

Estimates of the number of 'employment' travellers is available from the Department of Immigration and Multicultural Affairs incoming and outgoing passenger cards, with their expenditure captured in the International Visitors Survey (IVS). As a result the ABS has taken the opportunity to correct the classification, by reclassifying workers employed in another economy for less than 12 months to 'business' travel. The change has been applied to both travel credit and debit estimates.

The 'business' and 'other personal' travel series have been revised back to July 1975 to incorporate the change in classification of 'employment' travellers. The reclassification of 'employment' travellers resulted in a reallocation between the travel components, with no impact on the total travel series for the following periods:

credits - July 1975 to June 1992

debits - July 1975 to June 1995.

Relatively minor revisions have been applied to the total travel series for subsequent periods.

Alignment of the use of the International Visitors Survey (IVS) with the use of the National Visitors Survey (NVS)

As part of the review of the travel methodology, the use of data sourced from the International Visitors Survey (IVS) has been reviewed. The IVS is run by Tourism Australia on a quarterly basis and surveys international visitors in the departure lounges of Australia's major international airports as they are leaving Australia. The scope of the survey is all visitors aged 15 years and over. The IVS uses overseas arrivals and departures (OADs) data to benchmark its output. An attempt is made to align survey responses with OADs data by asking respondents to report their main purpose of journey, as they reported on their incoming passenger card.

The ABS uses the results from the IVS to derive per capita expenditure (PCE) data for international travellers in Australia. The calculation of the PCE estimates from IVS have been aligned with the treatment of data received from the National Visitors Survey (NVS), which calculates PCE estimates for Australians travelling abroad. The alignment of the use of the IVS with the use of NVS has resulted in the following relatively minor changes to the PCE:

the PCE estimates will be derived at the level required for the standard classification, rather than by the more detailed purpose of journey, that is 'business' and 'other travel';

'International airfares bought in Australia' will be excluded from the PCE estimates for both 'other personal' and 'business' travel; currently they are only excluded from 'other personal' travel; and

all IVS 'education fees' will be included in the PCE for 'other personal' travel when the main purpose of travel is not education. Business travel is unaffected as education fees were always included.

The combination of the changes to the classification of employment travellers and the alignment of the use of IVS and NVS data, resulted in a revision to travel credits in 2005-06 of $0.6b but had minimal impact on travel debits.